Economists say Oregon tax revenue forecast up

By JONATHAN J. COOPER and LAUREN GAMBINOOf the Associated Press

SALEM — A slow, steady economic recovery means the state treasury will take in more money than previously expected, economists said Thursday, but the news did little to thaw an impasse over pension cuts and tax increases.

A quarterly forecast indicated that revenue from tax collections will be up by more than $270 million since the last projections three months ago, when the forecast predicted $16.6 billion in revenue for the general fund and lottery.

The forecast came a day after Gov. John Kitzhaber unveiled a budget proposal aimed at breaking the deadlock between Democrats who want to raise new revenue and Republicans who want to cut public-employee pension benefits. The governor had given lawmakers until Thursday to get on board.

House Speaker Tina Kotek and Senate President Peter Courtney, both Democrats, quickly backed the governor's plan. Republicans leaders did not, and continued their demands for steeper pension cuts.

After his deadline came and went without Republican support, Kitzhaber issued a statement late Thursday urging lawmakers to move forward with a budget that doesn't include pension changes or tax increases.

“I appreciate the willingness of the Senate president and the House speaker to step to the middle for the good of the state,” said Kitzhaber, a Democrat. “I regret that Republican leadership has not indicated a willingness to develop a balanced compromise proposal involving both (pension changes) and new revenue.”

Kitzhaber and Democratic leaders say the tax increases they're seeking would avoid steep increases in college and university tuition and increase funding for child welfare programs, among other services.

Tax increases would require at least two GOP votes in each legislative chamber, and Senate Republicans have refused to provide them unless Democrats agree to more significant cuts to benefits under the Public Employees Retirement System.

House and Senate Republicans reiterated their position in a joint statement five minutes before the governor's deadline.

“As we told the governor in a personal meeting yesterday, we look forward to continuing to work with him and legislative Democrats to draft a plan that provides substantial PERS reform and delivers security for classrooms, seniors and the most vulnerable among us,” the statement said.

Senate Republicans have threatened to hold hostage a tax on hospitals and nursing homes — a key part of the Medicaid budget — in another effort to bargain for deeper pension cuts.

In the revenue forecast released Thursday, the tax revenue gains are divided between the current two-year budget cycle ending this year and the next two-year cycle ending in 2015.

Democrats said they were cheered by the report, and Republicans were less reassured.

Senate Minority Leader Ted Ferrioli, R-John Day, said in a statement that the projections should not change the budget debate.

“The focus of this session must remain the same: fixing Oregon's broken retirement system and fostering job creation,” he said.

Kotek, D-Portland, called the forecast “great news” and said the money should be used to reinvest in schools and education.

The forecast showed that personal and corporate income tax collections are higher than expected over the past few months.

State economists said there's a good chance the increased revenue will trigger corporate kicker rebates this year. There is a much slimmer chance of personal kicker rebates.

Kicker rebates are triggered when the state collects more in taxes than expected.

State economist Mark McMullen said that while Oregon's economy is improving, the pace of its recovery is slower than in previous downturns.